San Diego redevelopment 2.0

Civic San Diego, the agency created to wind down the city's redevelopment business, has a plan to stick around for a long time. It involves working-class neighborhoods, large banks, developers and millions of dollars in tax credits.

Over the next few years, the plan could dramatically impact the neighborhoods of Encanto and City Heights by giving Civic San Diego wide discretion in those areas to plan development projects called "transit villages."

While the idea is not widely known, supporters say it could help improve communities struggling with blight, boost local nonprofits and create more pedestrian-friendly neighborhoods.

"The challenge in these two neighborhoods is that the market fundamentals do not allow market-rate development to work," said Civic San Diego President Jeff Graham. "The rents and the sales prices are too low and the demand is too low to get private development to occur naturally on its own without significant subsidy."

To help lure developers and private investment to low-income neighborhoods, Graham wants the city to allow Civic San Diego to plan and permit transit villages along El Cajon Boulevard and Imperial Avenue.

As opposed to the traditional city permitting process, which adheres to community plans—documents that go through rigorous civic vetting before they're approved—this proposal could ease certain requirements on developers.

"The plan provides exceptions-to-the-rule that aren't offered anywhere else in the city to encourage investment to come to that neighborhood and offer a greater level of predictability to the developer and the investor than what exists under a community plan," Graham said.

For these two neighborhoods, a public-private investment fund of up to $100 million would be generated from banks, developers, pension funds, insurance companies, tax credits and grants. Graham said the city would not be responsible for any debt incurred by the project.

Interim Mayor Todd Gloria expressed enthusiastic support for the plan, which will go to the City Council for approval.

"In a post-redevelopment world, we need to be as creative and innovative as possible about making sure all our city's neighborhoods reach their full potential," he said. "I would also note that Civic San Diego has broad, if not unanimous, support on the City Council."

The plan would also give Civic San Diego, in consultation with neighborhood planning groups, the authority to require site-specific community benefits, such as affordable housing or open space, Graham said.

"We'd work with the community to find out where would they like offices to go, where would they like restaurants and maybe an entertainment area to go," he said. "Where could a public park go with a plaza and public parking underneath?"

However, members of Civic San Diego's board of directors recently raised concerns about taking over permitting and planning authority from the city.

"I just don't feel that we took the time to vet the idea," Director Howard Blackson said during a Sept. 25 board meeting. "I really wish that I could hear from [city Planning Director] Bill Fulton and the Planning Department's direction. I don't think he's prepared for this dialogue yet, either."

At the same meeting, Director Murtaza Baxamusa asked that members of city staff attend future meetings to help in form the board's decision. "We would be better educated if we had the city actually tell us what their position was," he said, "and we have not had that benefit.

"I don't want to set a policy where it appears like we're asking for a blank check from the city without actually talking or having them as part of this conversation," he added.

That request drew protest from Graham. "Do I need to get the entire City Council in here to tell the board what their direction is? I have briefed every council member on this, and I have not received any opposition. I have briefed many, many communities groups on this, and they are all asking When can you get out here and start helping us?'"

If Civic San Diego appears to be rushing, that's because it is. The city-owned nonprofit will likely have to lay off members of its 30-person staff in about 18 months if it can't find a new funding stream.

Until Gov. Jerry Brown dissolved redevelopment in 2011, the economic-development program helped revitalize blighted communities by allowing them to keep a greater portion of property-tax revenue and reinvest it to spur more development. When the state ended it, the city reassigned redevelopment staff, creating Civic San Diego to wind down its local agency and clean up its outstanding debt.

When that job is done, Civic San Diego will cease to exist. Or maybe not.

Earlier this year, Civic San Diego was awarded $35 million in new market tax credits, a federal program that gives private industry financial incentive to invest in low-income neighborhoods.

The credits, which can be lucrative for banks and other entities, drew the attention of Wells Fargo and Lowe Enterprises, a real-estate investment firm. Along with using the credits to fund transit villages, Civic San Diego staff proposed forming a separate $50-million investment pool with the two private companies.

With $5 million in unidentified equity, $35 million from Wells Fargo, and $10 million in its own tax credits, Civic San Diego could acquire income-producing commercial real estate, such as shopping centers. About $2.5 million or 25 percent of Civic San Diego's tax credits would go to fund "community facilities."

As the property owners, Civic San Diego could service the debt and pull in up to an additional $3 million in annual revenue from rent—money that could potentially sustain current operating levels, Graham said.

"These are specifically cash-flow-generating assets that are critical, community type of infrastructure that go to help support the mission of Civic," said Albert Lemus, senior vice president at Lowe Enterprises, which would structure the financial transactions.

However, again board members were skeptical, expressing concern that this idea also hadn't been property fleshed out or explained to them.

"Why are we doing this?" asked Director Michael Jenkins at the board's most recent meeting on Oct. 23. "Are we just doing it for generating some cash flow, which we greatly need, or because we're providing a benefit to the communities we're intending to serve?"

At the same meeting, Baxamusa proposed, unsuccessfully, that the agency establish an official policy outlining the agency's community goals.

"I'm thinking about good jobs, affordable housing and community amenities," he said. "We must be able to tie these in to any funding stream that we are proposing so that there is a guaranteed performance with respect to community needs."

If the plan rolls out as Graham suggested, Civic San Diego could turn out to be a huge boon for underserved communities looking to combat blight and increase community in vestment. If granted the permitting and planning authority, the agency could streamline the development process, cutting through layers of bureaucratic red tape.

Or, as feared by some board members, without a clear mission statement and the threat of financial collapse, Civic San Diego could waste that opportunity in favor of quick and lucrative development deals that pay little attention to community needs.